BG finalizes long-term LNG supply deal with India

Under the agreement, BG will supply state-owned Gujarat State Petroleum Corp., or GSPC, with up to 2.5 million metric tpy of LNG, concluding an initial agreement announced back in September 2011. Analysts estimate the 20-year gas contract could be worth around $20 billion.

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By SELINA WILLIAMS

LONDON -- BG Group on Wednesday said it had completed its
first substantial agreement for the long-term sale of liquefied
natural gas to India, one of the world's most rapidly growing
energy markets and a key customer for the super-cooled gas.

Under the agreement, BG will supply state-owned Gujarat
State Petroleum Corp., or GSPC, with up to 2.5 million
metric tpy of LNG, concluding an initial agreement announced in
September 2011. Analysts estimate the 20-year contract could be
worth around $20 billion.

The deal highlights BG's drive to focus on the exploration
and production and LNG shipping and marketing side of its
business as it exits transmission and distribution,
regasification and power generation. The company has already
divested some of those assets, including last year's sale of
its stake in Brazilian gas distributor Comgas.

The deal also underscores the growing significance to major
energy suppliers of India, where the International
Energy Agency sees natural gas demand almost tripling to 178
billion cubic meters by 2025 from 64 bcm in 2010 under its base
case scenario.

"We have been active in India for more than 15 years and it
is a large and important market that we understand well. We
expect the country to lie third among LNG importing countries
by 2025, behind Japan and China," said BG chief executive Chris
Finlayson.

Earlier this week, BG confirmed the natural gas resource and
production potential in one of its offshore Tanzania fields and
is in the process of selecting a site for an onshore LNG
facility to export the gas.

Analysts say that East African countries such as Tanzania
and Mozambique, locations of major recent gas discoveries, are
well placed to serve growing energy demand in India, which is
already ramping up LNG imports as demand from the power
generation and other sectors outstrips domestic production.

Suppliers are already battling for the contracts with India.
Last October, GAIL (India) clinched a 20-year deal to buy LNG
from the Singapore unit of Russia's state-owned gas giant OAO
Gazprom.

India currently imports about a quarter of its gas
requirements. But if gas production doesn't increase faster, India may have to import as much as
half its needs within a few years, analysts say. Indeed,
several gas-fired power plants are already shuttered or
operating below capacity due to a shortage of gas.

Under the terms of the deal signed with GSPC, BG will
initially supply 1.25 million tpy of LNG beginning in 2015 and
for up to 20 years, potentially increasing to 2.5 million tpy
after two years.

GSPC will be supplied from BG's global LNG portfolio, which
means the gas could come from any of a number of the company's
projects, including giant
developments in Australia.

"Our long-term agreement with GSPC adds another dimension to
our global LNG portfolio with the addition of material new
supplies to a fast growing market. We look forward to building
our presence in the country," Mr. Finlayson said.

Dow Jones Newswires

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